WOODMEN OF THE WORLD LIFE INSURANCE SOCIETY, A NEBRASKA NOT-FOR-PROFIT FRATERNAL BENEFIT SOCIETY, APPELLANT,
NEBRASKA DEPARTMENT OF REVENUE, AN AGENCY OF THE STATE OF NEBRASKA, AND TONY FULTON, TAX COMMISSIONER, APPELLEES.
Administrative Law: Judgments: Appeal and
Error. In an appeal under the Administrative Procedure Act,
an appellate court may reverse, vacate, or modify the
judgment of the district court for errors appearing on the
__:__: __ . When reviewing an order of a district court under
the Administrative Procedure Act for errors appearing on the
record, the inquiry is whether the decision conforms to the
law, is supported by competent evidence, and is neither
arbitrary, capricious, nor unreasonable.
Administrative Law: Statutes: Appeal and
Error. The interpretation of statutes and regulations
presents questions of law, in connection with which an
appellate court has an obligation to reach an independent
conclusion irrespective of the decision made by the court
Statutes: Legislature: Intent. In construing
a statute, a court must determine and give effect to the
purpose and intent of the Legislature as ascertained from the
entire language of the statute considered in its plain,
ordinary, and popular sense.
Statutes: Appeal and Error. Absent a
statutory indication to the contrary, an appellate court
gives words in a statute their ordinary meaning.
Statutes. A court must attempt to give effect to all parts of
a statute, and if it can be avoided, no word, clause, or
sentence will be rejected as superfluous or meaningless.
7. __ .
Statutes relating to the same subject matter will be
construed so as to maintain a sensible and consistent scheme,
giving effect to every provision.
Neb. 44] 8. Taxation:
Proof. The burden of showing entitlement to a tax
exemption is on the applicant.
Statutes: Taxation. Statutory tax exemption
provisions are to be strictly construed, and their operation
will not be extended by judicial construction.
__:__. An exemption from taxation must be clearly authorized
by the relevant statutory provision.
Taxation: Presumptions. An exemption from
taxation is never presumed.
Appeal and Error. An appellate court is not
obligated to engage in an analysis that is not necessary to
adjudicate the case and controversy before it.
Taxation: Words and Phrases. Sales and use
taxes are imposed on the activity of retail transactions,
measured by gross receipts. It is a tax upon the sale, lease,
rental, use, storage, distribution, or other consumption of
tangible personal property in the chain of commerce.
Taxation: Sales. A sales tax is not imposed
on the article sold, but, rather, upon the transaction called
Taxation: Words and Phrases. Both occupation
taxes and sales taxes are excise taxes for the purpose of
raising revenue. An excise tax is a tax imposed on the
manufacture, sale, or use of goods or on an occupation or
activity, and is measured by the extent to which a privilege
is exercised by the taxpayer, without regard to the nature or
value of the taxpayer's assets. An excise tax is imposed
upon the performance of an act.
Statutes: Taxation. The plain language of
Neb. Rev. Stat. § 44-1095 (Reissue 2010) exempts taxes
on the "funds" of a fraternal benefit society, but
it does not exempt the fraternal benefit society from sales
and use taxes, because such taxes are imposed on its retail
purchase activity, not on its funds.
Due Process. The first step in a due process
analysis is to identify a property or liberty interest
entitled to due process protections. If there is a protected
interest at stake, the question then becomes what process is
. The fundamental requirement of due process is the
opportunity to be heard at a meaningful time and in a
Trial: Expert Witnesses: Appeal and Error. A
trial court's ruling in receiving or excluding an
expert's testimony which is otherwise relevant will be
reversed only when there has been an abuse of discretion.
Expert Witnesses: Evidence. Expert testimony
is relevant and admissible only if it tends to help the trier
of fact understand the evidence or determine a fact issue,
and expert testimony concerning a question of law does not
tend to accomplish either of these goals. Consequently, [299
Neb. 45] expert testimony concerning a question of law is
generally not admissible in evidence.
Trial: Expert Witnesses: Testimony:
Statutes. Expert testimony from legal scholars on
the proper legal interpretation of statutes is generally
irrelevant and should not reach a judge's attention by
way of the witness stand.
from the District Court for Lancaster County: Andrew R.
Jacobsen, Judge. Affirmed.
E. Novotny, John M. Walker, and Daniel J. Hassing, of Lamson,
Dugan & Murray, L.L.P., for appellant.
Douglas J. Peterson, Attorney General, and L. Jay Bartel for
Heavican, C.J., Miller-Lerman, Cassel, Stacy, Kelch, and
appeal requires us to determine whether the Legislature has
exempted fraternal benefit societies from sales and use taxes
imposed by the State of Nebraska. Woodmen of the World Life
Insurance Society (Woodmen) requested an exemption from sales
and use taxes and sought a refund of more than $2 million in
such taxes previously paid. The Nebraska Department of
Revenue (NDOR) denied Woodmen's request, and after a
hearing, the Tax Commissioner affirmed that denial. Woodmen
sought judicial review, and the district court affirmed.
Because we agree no statute exempts fraternal benefit
societies from paying sales and use tax, we affirm the
judgment of the district court.
General Background Nebraska's statutes regulating and
relating to fraternal benefit societies are codified at Neb.
Rev. Stat. §§ 44-1072 to 44-10, 109 (Reissue 2010
& Cum. Supp. 2016). A fraternal benefit society is
defined to include:
[299 Neb. 46] Any incorporated society, order, or supreme
lodge, without capital stock, . . . conducted solely for the
benefit of its members and their beneficiaries and not for
profit, operated on a lodge system with ritualistic form of
work, having a representative form of government, and which
provides benefits in accordance with sections 44-1072 to
44-10, 109 . . . 
benefit societies operate "for one or more social,
intellectual, educational, charitable, benevolent, moral,
fraternal, patriotic, or religious purposes for the benefit
of its members." They may enter into contracts to provide
benefits to their members, including death, endowment,
annuity, disability, medical, and life insurance
benefits. A fraternal benefit society may
"invest its funds only in such investments as are
authorized by the laws of this state for the investment of
assets of life insurers." All assets must be held,
invested, and disbursed for the use and benefit of the
undisputed that Woodmen is a Nebraska fraternal benefit
society. The primary issue in this appeal is whether Woodmen
is exempt from paying Nebraska sales and use taxes. The
answer to this question generally requires consideration of
two statutes: § 44-1095 and Neb. Rev. Stat. §
77-2704.12 (Reissue 2009).
two exceptions not relevant here, the "funds" of a
fraternal benefit society are exempt from taxation pursuant
to § 44-1095 (Reissue 2010) which, until recently,
provided: "Every [fraternal benefit society] shall be a
charitable and benevolent institution, and all of its funds
shall be exempt [299 Neb. 47] from all and every state,
county, district, municipal, and school tax other than taxes
on real estate and office equipment."
version of § 44-1095 quoted above was in effect when
Woodmen applied for the tax exemption and refund at issue in
this appeal, and we confine our analysis to this statutory
language. However, for the sake of completeness, we note the
Legislature amended the statute in 2015. Section 44-1095
now provides that "all of [a charitable benefit
society's] funds and property shall be exempt
from all and every state, county, district, municipal, and
Nebraska Revenue Act of 1967 imposes a sales tax on the gross
receipts of retail sales of tangible personal property sold
in this state and a use tax when tangible personal
property purchased outside of Nebraska is stored, used, or
consumed in Nebraska. Generally speaking, the sales tax
applies when tangible personal property is purchased in
Nebraska and the use tax applies when it is purchased outside
Legislature has exempted certain sales and uses from
taxation. As relevant to this appeal, certain
nonprofit organizations are exempt from sales and use taxes
under § 77-2704.12(1). The nonprofit organizations
enumerated in § 77-2704.12(1) include, for example,
those created exclusively [299 Neb. 48] for religious
purposes,  private educational institutions,
hospitals and health clinics,  and certified organizations
providing community-based services for persons with
disabilities.To be exempt from sales and use tax, an
"organization listed in [§ 77-2704.12(1)]"
must apply for exemption using forms provided by the Tax
Commissioner and, if approved, a certificate of exemption is
issued. Fraternal benefit societies are not
listed among the nonprofit organizations enumerated in §
October 2013, Woodmen filed an application for exemption from
sales and use tax with NDOR, relying exclusively on §
44-1095. Woodmen used a standard NDOR form to seek the
exemption. Because the standard form did not identify §
44-1095 as a basis for seeking exemption from sales and use
tax, Woodmen attached a letter explaining its position. NDOR
denied Woodmen's application using a standard letter
which also did not reference § 44-1095. Instead, the
reason given for denying the exemption was that Woodmen did
not qualify as a religious organization. NDOR gave this
reason because it concluded that of the available nonprofit
exemptions, that one "fit the closest."
January 2014, Woodmen filed a claim for overpayment, seeking
a refund of more than $2 million in sales and use tax, again
relying on § 44-1095. NDOR denied this claim. Woodmen
petitioned for redetermination of both its exemption
application and its reimbursement claim. In response, counsel
for NDOR sent Woodmen a letter explaining the legal basis for
NDOR's conclusion that § 44-1095 did not exempt
Woodmen [299 Neb. 49] from sales and use tax. The parties
agreed to consolidate Woodmen's requests and hold a
single hearing before the Tax Commissioner on both the
application for an exemption and the claim for overpayment.
to such hearing, the parties conducted discovery, exchanged
exhibit and witness lists (including witnesses' expected
testimony), and met to discuss the legal bases for their
differing positions. The parties also filed prehearing
motions that were ruled on by the hearing officer. As
relevant to the issues on appeal, the hearing officer
sustained NDOR's motion in limine to exclude the
testimony of Woodmen's expert witness, a tax law
professor. The hearing officer reasoned that although the
professor was an accomplished and recognized legal scholar,
his opinions on the proper interpretation of Nebraska law
were more properly characterized as legal argument than
testimony. The hearing officer invited Woodmen to include the
tax law professor's opinions in its posthearing briefing,
but did not permit the professor to testify.
hearing before the Tax Commissioner was held April 13, 2015.
The rules of evidence were not invoked. The parties
stipulated that Woodmen was a fraternal benefit society, that
it timely submitted both its application for an exemption and
its request for a refund, and that both were properly before
the hearing officer. The Tax Commissioner observed that
because the parties presented no factual disputes:
"Resolution of this dispute depends entirely upon the
answer to the following question of law: Is the language of
§ 44-1095 sufficient in itself to confer [on Woodmen] an
exemption from the Nebraska sales and use taxes ....?"
was adduced, and Woodmen made an offer of proof regarding the
tax law professor's excluded testimony. After posthearing
briefing, the Tax Commissioner entered an [299 Neb. 50] order
finding Woodmen was not exempt from sales and use tax under
§ 44-1095, and thus was not entitled to a refund.
Commissioner's order analyzed each party's proffered
definitions of the term "funds" in § 44-1095,
and ultimately rejected them all. Instead, he determined the
meaning of "funds" by considering how the term was
used in other statutes governing fraternal benefit
societies. The Tax Commissioner noted that under
§ 44-1093(2), fraternal benefit societies are authorized
to "create, maintain, invest, disburse, and apply any
special fund or funds necessary to carry out any purpose
permitted by the laws of such society." Relying on
§ 44-1093, the Tax Commissioner concluded that
"funds" under § 44-1095 must refer to
"those same special funds allowed in §
44-1093." He thus reasoned that fraternal benefit
societies were not exempt from sales and use taxes under
§ 44-1095, because that exemption applies only to taxes
imposed on the "special funds themselves, not to the
actions or transactions taken with respect to the
sought judicial review of the Tax Commissioner's final
decision pursuant to the Administrative Procedure
Act.The Lancaster County District Court
conducted a de novo review and affirmed the Tax
Commissioner's denial of the exemption and refund.
noting that fraternal benefit societies are not among the
nonprofit organizations exempt from sales and use tax under
§ 77-2704.12(1), the district court confined its
analysis to whether the language of § 44-1095 conferred
an exemption from Nebraska sales and use tax.
the district court rejected Woodmen's argument that
§ 44-1095 conferred an entity-based tax exemption on
fraternal benefit societies generally, as opposed to an
exemption on just [299 Neb. 51] its funds. The district court
noted the difference between the language used in §
44-1095 and the language used in statutes that provide
entity-based tax exemptions and concluded that a plain
reading of § 44-1095 indicated the Legislature intended
to confer a tax exemption on the "funds" of a
fraternal benefit society, but not on the entity itself.
like the Tax Commissioner, the district court looked to other
statutes governing fraternal benefit societies to discern the
meaning of "its funds" in § 44-1095. The court
observed that under § 44-1092, a fraternal benefit
society is authorized to invest "its funds" only in
certain investments, and that under § 44-1093, a society
may "create, maintain, invest, disburse, and apply any
special fund or funds" necessary to carry out its
permitted statutory purpose. Harmonizing these statutes, the
district court reasoned that the "funds" exempted
under § 44-1095 must be the same funds referenced in
§§ 44-1092 and 44-1093.
the court examined the essential nature of sales and use
taxes, including this court's opinion in Anthony,
Inc. v. City of Omaha, and concluded that sales and
use taxes are '"a tax upon the privilege of
buying tangible personal property'" and not a
tax on funds. The district court reasoned that the tax
exemption on funds in § 44-1095 did not apply to taxes
on the retail transactions of fraternal benefit societies. As
such, the court generally concluded there was no conflict
between §§ 44-1095 and 77-2704.12(1), in that the
former addressed exemptions for taxes on particular funds,
while the latter addressed exemptions for taxes on retail
transactions. Alternatively, the district court reasoned that
if the ...